While the talks over more immediate spending seem stuck, the case for stimulus is easy to make with the current level of elevated unemployment.

But beyond the obvious near-term case, whoever is in the White House on the afternoon of January 20 should take heed from lessons learned from the last four years: unemployment can go lower than previously thought, but maybe only if political leaders are willing to take fiscal deficits past levels previously thought prudent.

Reaching this level meant there was little need for continued monetary policy stimulus and that fiscal stimulus would likely only have meager gains.

But unemployment kept on falling, and the labor force participation rate — or the percentage Americans actively in the job market — drifted up. .

"It wasn't the fiscal policy I would have chosen, but it proved that there was slack in the labor market, we got continued reductions in unemployment without a huge uptick in wage or price inflation," Bivens said.

So while a Biden White House may look favorably on stimulus spending and new government programs, they could be stymied by a Republican majority in either the House or Senate or the deficit skittishness of Democratic senators who would represent the deciding 50th vote for any legislation. .

But fiscal policy does not solely determine the unemployment rate

In a speech in August, Fed Chair Jerome Powell admitted that the "historically strong labor market did not trigger a significant rise in inflation" and that these forecasts had been based on estimating an unemployment rate below which inflation would kick up

The Fed's estimate of that rate dropped as continued labor market strength did not prompt inflation from 5.5%in 2012 to 4.1%